MPs excluded from tax avoidance legislation

Story updated 15:30 07/04/2011

MPs HAVE HAD specific provisions made for them regarding tax avoidance rules introduced in the Finance Bill, Accountancy Age has learned.

Legislation to prevent the practice of disguised remuneration, which uses trusts to provide non-repayable tax free loans and offshore pension schemes to avoid tax, was included in the Finance Bill.

However, section 554E (8) says the legislation “does not apply by reason of a relevant step taken by the Independent Parliamentary Standards Authority (IPSA) in relation to a member of the House of Commons”.

Mike Warburton, tax director at Grant Thornton, said there was no obvious reason why MPs had their own specific provision.

Warburton said: “It is difficult to see why our MPs need this specific exemption. I understand why MPs don’t want to fall in this particular trap but the same could be said of many of my clients who might for entirely commercial reasons be paid by an intermediary. If the legislation is not clear enough to protect MPs, how can I be sure my clients are protected?

“I’m a great believer in making sure that when our elected representatives enact legislation they do so with a real world perspective and the best way of achieving that is to ensure that they are treated under the law the same as everybody else.”

The new rules on disguised remuneration are intended to catch complex arrangements designed to avoid income tax through loans made to executives, typically through offshore structures, he added.

An HMRC spokesman said:”IPSA makes certain payments to MPs to enable them to carry out their parliamentary duties. This is not tax avoidance and has therefore been excluded from the new rules. Other third party arrangements involving MPs would not be excluded from the new rules.”

The rules have been criticised for being overly complex and for being unclear as to what benefit schemes are covered.

Accountancy Age also revealed that Treasury estimates over the revenue to be collected by the legislation had increased by 50% in three months.

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